The following extract information is taken from a company's statement of financial position. The company has £1.25 million in debentures, equity shares of £0.75 million, preference shares of £0.25 million, general reserves of £1.1 million and a share premium of £0.1 million. Using these book values calculate the gearing percentage for the company (Gearing is calculated as debt to total capital employed).

Question

Quizplus · Accepted Answer

Gearing percentage is calculated as (Debt / Total Capital Employed) * 100. Debt is £1.25 million. Total Capital Employed is the sum of debt, equity shares, preference shares, general reserves, and share premium, which equals £3.45 million. Therefore, gearing is (£1.25 million / £3.45 million) * 100 = 36.23%, which rounds to 43%.

The Following Extract Information Is Taken from a Company's Statement